Sep 21,2006: ET: Bill to regulate microfinance sector on cards

Bill to regulate microfinance sector on cards
Our Bureau NEW DELHI

    INTERNATIONAL venture funds foraying into microfinance will not have to
grapple with conflicting rules of operation. The government is preparing a
bill to regulate the sector, which is expected to grow to Rs 35,000 crore,
by ’10. The big funds planning to make a foray in the sector include the
Maharashtra government promoted VC Fund – Urjankur, UK-based CDC, Unitus
Private Equity and Delhi-based Lok Capital. Even IFC has set up a fund with
the Andhra Pradesh Industrial Development Corporation.

    Finance ministry services special secretary Vinod Rai said on Wednesday,
the microfinance legislation will be tabled in the winter session of
Parliament. This would provide a regulator for the banking needs of more
than 400 million Indians, who are currently out of the banking system. “The
draft (on micro finance) is ready. It is likely to be put before
 Parliament,” Mr Rai said at a CII seminar on microfinance. He said the
stress will be given on development and nurturing of the microfinance
movement in the country. The formal and informal channels should club
synergies, to push growth and yet be development oriented, he added.

    He justified the prevalence of a somewhat higher interest rates in the
sector, saying it was not possible to keep the transaction costs low for the
system to be sustainable.

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